The basic premise for Keyperson insurance is that business is an enterprise for profit. Since the purpose of business is profit, it is self-evident that the most valuable asset of a business is the asset which produces the most profit. The most valuable asset, then, is not capital, since capital is merely a commodity that earns a rate of return. Any gain beyond that is ascribable to management expertise and ingenuity.
Therefore, the HUMAN ASSET – the value of skill, judgement and the driving force of incentive – is the most valuable asset of any business, since these values make it possible for a business to show substantial profits and to progress. Generally speaking, most businesses would not run the risk of staying in business without insuring their tangible assets. However, very few apply the same principle to insuring the businesses’ HUMAN ASSETS.
In a presentation at an MDRT meeting many years ago, the late David Cowper made this comment: “ A company is a three-legged stool: capital, labour and management. It is the latter where Keyperson opportunities exist because it’s what management does with the other two legs that make a business successful.”
In entering this particular market back in the ’70s, the starting point for me was to develop questions which would enable business owners to see for themselves the value of this form of insurance.
We are more educators than we are salespeople and the education starts with ourselves – working out why businesses should have Keyperson insurance and then developing questions that will raise problems in such a way that business owners would be happy to discuss solutions to the problems.
My experience over the years in selling Keyperson insurance in the small business area — husband/wife type businesses, or small partnership-type businesses — was that there are really only two reasons for Keyperson insurance – capital & revenue.
Capital: payout debts and release the deceased estate and surviving business owners from personal guarantees; Revenue: funds to provide a “cash cushion” to stabilise the business during the readjustment period following the death of the keyperson.
The business owners that I dealt with were always time-poor. My questions were designed to catch their attention quickly by relating to a problem that they could grasp. Once they understood the nature of the problem they were happy to engage in a discussion.
For example, in business with arms-length shareholders, I would ask:
Q. What would be the maximum amount of corporate liabilities at any one time in a year? In the small-business owner market, these were always readily provided. I would then ask the next question:
Q. Have you/spouse/partners had to back these liabilities with personal guarantees? The answer was always in the affirmative. I would then ask the next question:
Q. Are the guarantees joint & several? Again, the answer was always in the affirmative. I would then ask the next question: (The role of the adviser is to introduce the topic of death into the economic equation of a business person’s life)
Q. In the event of the death of one of the shareholders, are you aware of the ramifications of joint & several personal guarantees? Interestingly, the majority of business owners do not have an answer to this particular question. This then gave me the opportunity of offering “advice” in the first meeting which enhanced the development of the relationship and always led to a second meeting where I could offer solutions to the problem.
What did these questions have to do with the sale of insurance? Nothing! What did they have to do with the sale of me? Everything! People buy people. They buy your advice first and your product last, and there is daylight in between!